Investment Companies Roundup

Kindly sponsored by Baillie Gifford

 Table of contents 

 New research 

Here is a list of research we published over January:

An annual overview note on Shires Income (SHRS)

“Shires Income (SHRS) will look to build on a strong second half to 2019 over the coming year. The trust’s strategy allows it to augment its income focus with a portfolio of preference shares and convertible securities, which allows it to invest in growth-focused companies. The trust continues to issue shares, and this should both help widen its audience, improve liquidity in the shares, and reduce its average running costs.”

An initiation note on GCP Infrastructure (GCP)

“We have initiated coverage on GCP Infrastructure (GCP), which for almost 10 years, has met its objective of delivering high and stable income for its shareholders with low volatility In an age where real yields on government securities are negligible, there are clear attractions to a fund that derives a high proportion of its revenue from government bodies yet offers a 5.9% yield.”

An annual review of Investment Companies in 2019

“In our annual review of the investment companies sector, we looked at the main trends across performance by sector, movements in discounts/premiums, capital raising and major news stories. There was plenty to worry about going into 2019, though this did not stop risk assets having a year that would have defied all but the most optimistic forecasters. The initial trigger came from the US, where the central bank performed a U-turn, abandoning planned interest rate increases. Gold also had its best run in years.”

An annual review of listed Real Estate Companies in 2019

“We also published a dedicated review of the property sector. Listed property companies and REITs performed well, all things considered. The total market capitalisation of property companies reached £88.6bn at the end of the year, an increase of 24% over the course of 2019.The year ended on a positive footing for the property sector as the Conservatives’ big general election win brought much-needed political certainty.

Alternative property sectors – self-storage, student accommodation and healthcare – were the standout performers as the specialist nature of the sectors and positive market dynamics were recognised.”

 In this issue

  • Performance – After beginning the year in the ascendancy, helped by easing tensions between the US and Iran, the outbreak of coronavirus in China pulled the breaks on risk assets, particularly hitting Asian and resource funds. Significant selling has taken place in early February (not included in this roundup), following the end of the Chinese new year celebration. Out of the bottom 10 performers by NAV, seven were either Asian or resource-focused. Amongst the outperformers, New life-sciences fund, RTW Venture had the third best NAV return behind Manchester & London and Oakley Capital. Manchester & London’s NAV return owed to good months for tech-based holdings, including Amazon and Alphabet;
  • Discounts/premiums – Before January, Standard Life Private Equity’s discount had widened to a point where a lot of investors began to see value. Elsewhere, Baillie Gifford European Growth’s share price has been increasing since Baillie Gifford took over the management contract from Edinburgh Partners. Several renewables funds came under attack (see the news section) from brokers, pulling down Bluefield Solar‘s premium;
  • Money in and out – It was a quiet month of fundraising with no major placings;
  • Major news stories – Renewable energy funds came under attack from brokers and SQN Asset Finance discussed the problems it was having with anaerobic digestion plants.

 Performance data

January’s biggest movers in NAV and price terms are shown in the charts below:

On the positive side:

  • Amongst the outperformers, Adamas Finance Asia’s price move stands out. It announced that one of its key positions, Future Metal Holdings, had commenced dolomite production in China;
  • New life-sciences fund, RTW Venture had the third best NAV return behind Manchester & London and Oakley Capital. Manchester & London’s NAV return owed to good months for tech-based holdings, including Amazon and Alphabet. This helped Allianz Technology too;
  • Elsewhere, Standard Life Private Equity’s annual results were well received. It believes valuation in its core mid-market European focus are less stretched than in the US.

On the negative side:

  • Significant selling has taken place in early February (not included in this roundup), following the end of the Chinese new year celebration. Out of the bottom 10 performers by NAV, seven were either Asian or resource-focused;
  • Aberdeen New Thai’s NAV also declined in December, before the coronavirus outbreak. Still, a ban by China on outbound tour groups into Thailand hit all Thai assets;
  • BlackRock Energy and Resources Income, BlackRock World Mining and CQS Natural Resources Growth & Income were hit with demand for resources likely to slip markedly over the coming weeks and months;
  • Elsewhere,  SQN Asset Finance Income was hit by a write-down to one of its main loan assets, leading to an exodus in the shares;
  • The pullback in Infrastructure India’s shares came after they nearly doubled over December.


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 Discounts and premiums

The table below shows the top five movers in either direction (more or less expensive relative to NAV):

wdt_ID Fund 31 Jan (%) 31 Dec (%)
1 Adamas Finance Asia -63.70 -76.80
2 Standard Life Private Equity -10.10 -20.50
3 Henderson Alternative Strategies -11.20 -21.10
4 Baillie Gifford European Growth 1.90 -7.90
5 Jupiter Green 5.10 -4.20
6 Schroder UK Public Private -38.30 -28.90
7 JPMorgan China Growth & Income* -12.50 -3.00
8 Bluefield Solar 13.80 23.40
9 Hadrian's Wall Secured -38.60 -28.10
10 SQN Asset Finance Income -44.60 -11.00

More expensive relative to NAV:

  • We touched on the catalyst behind Adamas Finance Asia’s above while Standard Life Private Equity’s discount had widened to a point where a lot of investors began to see value;
  • Henderson Alternative Strategies’s discount narrowing was price-led after it said it would seek approval to realise its assets and wind up the company;
  • Baillie Gifford European Growth’s share price has been increasing since Baillie Gifford took over the management contract from Edinburgh Partners;
  • Jupiter Green’s shares were stronger for a second month in succession, having earlier been weighed down by its underweight allocation to the US as well as stock selection.

Cheaper relative to NAV:

  • SQN Asset Finance Income was discussed in the ‘winners and losers section’ while Hadrian’s Wall Secured  Investments’s shares began to fall last July and this continued over the rest of the year. The market’s initial reaction was believed to be a knock-on from provisions the fund made in May against two loans made to wood pellets companies, while Funding Circle’s wind up has affected the sector as well;
  • Several renewables funds came under attack (see the news section) from brokers, pulling down Bluefield Solar;
  • JPMorgan China Growth & Income’s discount was hit by the virus, though this has been much more pronounced in early February.


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 Money in and out

Fundraising highlights from the month:

Money coming in:

Money going out:

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 Major news stories 

Portfolio Developments:

Corporate news:

Managers and fees:

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 Income 

The following funds announced their full year dividends in January (please refer to the attached document for a list of the notes around the numbers):


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 Events

Here is a selection of upcoming events:

Master Investor – the UKs largest private investor show – 28 March 2020

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 Guide

Our Independent Guide to quoted investment companies is an invaluable tool for anyone who wants to brush up on their knowledge of the investment companies’ sector.


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 The legal bit

This note was prepared by Marten & Co (which is authorised and regulated by the Financial Conduct Authority).

This note is for information purposes only and is not intended to encourage the reader to deal in the security or securities mentioned within it.

Marten & Co is not authorised to give advice to retail clients. The note does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

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